"In recent decades. . . the fraction of the total output of our economy that is essentially conceptual rather than physical has been rising. This trend has, of necessity, shifted the emphasis in asset valuation from physical property to intellectual property and to the legal rights inherent in intellectual property. Though the shift may appear glacial, its impact on legal and economic risk is beginning to be felt.

"Over the past half-century, the increase in the value of raw materials has accounted for only a fraction of the overall growth of U.S. gross domestic product (GDP). The rest of that growth reflects the embodiment of ideas in products and services that consumers value. This shift of emphasis from physical materials to ideas as the core of value creation appears to have accelerated in recent decades."

Greenspan elaborated on the topic, mostly with questions rather than answers. But they are good questions. Such as:

"If our objective is to maximize economic growth, are we striking the right balance in our protection of intellectual property rights? Are the protections sufficiently broad to encourage innovation but not so broad as to shut down follow-on innovation? Are such protections so vague that they produce uncertainties that raise risk premiums and the cost of capital? How appropriate is our current system--developed for a world in which physical assets predominated--for an economy in which value increasingly is embodied in ideas rather than tangible capital?"

This issue of the nature of capital, the reality that it is increasingly conceptual rather than physical, is fascinating, crucial, and seldom discussed. For more on it, see works by Margaret Blair, then of the Brookings Institution, and Baruch Lev, a scholar at NYU. See also my articles on the stock options controversy, here and here, and the references therein.